Vendor payments is a payment to a third party from a non-member of an assistance unit to cover an assistance unit’s expenses. Purchasing goods or services from an external vendor, supplier, or provider begins with a business concern placing an order with the vendor. A vendor payment is what is made once the business receives the goods and services it ordered. The business makes this payment once the invoice is received from the vendor.
Account payable, which covers vendor payments, is a major part of the accounting process. When a company has several subsidiaries, invoice processing can become rather complicated. Standardizing processes and maximizing efficiency are important factors.
Payment to vendors is the last step in a business’s procure-to-pay cycle and are the one of the most critical financial transactions around the world. The blog discusses the concept of vendor payments, which refer to payments made to external vendors and suppliers. Processing vendor payments fall under the responsibilities of accounts payable.
Vendor payments need to be handled promptly and systematically in order to ensure relationships remain stable. It is also necessary to ensure that all liabilities are paid before invoice due dates comes into play. As a result, it promotes long-term business growth by fostering strategic partnerships with vendors.
Below are some conditions in which vendor payment management becomes extremely important.
- The payment of vendors in different currencies
- Vendors in large numbers
- Tracking credit periods in a variety of lengths
- Payables are made across numerous branches and units, so managing cash flow is crucial,
- Buying and selling from the same vendor, with liability offsetting required,
- The MSME Act and GST laws require timely payments to be met.
The trend of centralizing payments is on the rise
As well as streamlining the payment process and improving controls for the group. Coprocess Vendor Payment Terms Module also allows subsidiaries to keep their own payment processes in place. Business owner can reap many benefits by centralizing their payment processes through the payment factory.
Treasury may handle the vendor payment module in conjunction with a Shared Service Center (SSC) or Shared Service Organization (SSO). Standardizing procedures and optimizing processes are all major benefits.
A description of how vendor payments are processed
Large companies accounts payable departments process vendor payments, while medium-sized companies’ accounting departments handle them. Small businesses and professional concerns’ accountants handle them.
In order to pay vendors, follow these steps:
- You will have to collect the invoice from the vendor or supplier if the vendor hasn’t yet sent it.
- Check for the authorization of the vendor’s authorized signatory and verify that the purchase invoice received is accurate and complete.
- Invoices must be accounted for through the ERP or accounting system by making the necessary journal entries, as well as understanding, calculating, and accounting for any taxes such as tax deducted from income and GST input tax credits.
- Reconciliation of GSTR-2A and GSTR-2B with the purchase register should be conducted at regular intervals in accordance with the requirements of the Income Tax Rules. Inform vendors that they must report ITC on their GSTR-1s if they have not yet uploaded them. please report such ITC in your GSTR-3B return filed either monthly or quarterly.
- Be sure to get the approval of your business’s authorized signatory before or on the date of the invoice due date.
- Use a payment voucher to record the vendor’s payment, net of TDS, in you books of accounts. Pay the vendor according to the method you agreed upon ahead of time. Various methods of payment can be used, including UPI, bank transfers, e-wallets, ecommerce payment gateways, mobile payments, cash, etc. Once the payment is successful, record a copy of the receipt with the vendor.
Cloud-based vendor payment systems can automate many of the steps mentioned above, and sometimes they can be integrated with ERP software as well.
Payment Management solutions for vendors
When businesses perform vendor payments, most use spreadsheets to calculate TDS. But now, as they undergo a digital transformation, more reliance is placed on innovative, tech-based solutions.
Vendor Payment Management solutions offer the following benefits:
- Enhances approval timelines by automating approvals
- Keeps a digital trial to ensure that data is audit-ready
- Reduces manual intervention to simplify bill payments
- Makes it easy for your organization to track cash flows
In order to implement the solution effectively, the company must first learn about its workflow, its pros and cons. This includes looking at the existing vendor payment process, any gaps, and suggesting ways to resolve these. In addition, the time and cost involved in processing vendors payments need to be considered.
It is very important for a business owner to understand how digital payments can benefit their business, the risks involved and how to secure a smooth payment channel before making a decision.
Select a solution which meets your business requirements and has scalable features. It should provide workflow automation and audit trials. Involves the team affected by the change in the setup process if you have a deep pocket. Integration will ensure no duplicate invoices or payments.
It is not surprising to see dramatic changes in the efficiency and productivity of the team when you use the vendor payment platform. The management of tax and vendors becomes effortless and error-free once you put it to use.
Likewise, Easebuzz neo vendor payment platform allows to automate most of tasks associated with vendors payments, including updating vendor paid invoice data, tax calculation, bank account details, and credit period information.
FAQ’s
1. What is Vendor Payment?
A vendor payment process assists accountants in adding, tracking, making vendor payments, and automating TDS payments through the NSDL website for you.
2. Vendor payments: how do I pay my vendors
Vendor payments are made easy by using Easebuzz Neo Vendor Payments. We make it easy to pay vendors and suppliers. Once you upload an invoice, we automatically capture details like invoice numbers, payments due dates, and amount payables.
Using the dashboard, you can send payments instantly via NEFT, RTGS, IMPS, and UPI.
3. What are the ways to deduct TDS?
Using our Vendor payments platform, TDS deductions at invoice level or vendor level will be automatically calculated, and the money payable to the vendor will be calculated automatically. At the end of each month, TDS will be aggregated at category level, and paid to the vendor.
4. Accounts Payable: what is it with an example?
Accounts payable (AP), is an accounting term that describes the money due to suppliers or vendors for goods and services purchased on credit. The balance of accounts payable is the sum of all outstanding payments owed to a company by its suppliers. On the company’s cash flow statement, the change or decrease in total AP over the previous period will be shown.
5. What if I want to track invoices that were paid by check or cash?
If you pay invoices via cash/cheque, you can keep track of all invoices in a single place. You can also deduct TDS, which will be added to the monthly TDS payment.
6. How do accounts payable differ?
Accounting can be confusing. People often misunderstand the terms accounts payable, trades payable, or accounts receivable. Accounts payable are the money that a company owes suppliers and vendors for goods or services. As they are the ones receiving the money, the vendor or supplier will record the same amount as amounts payable.
There is a slight difference between accounts payable and trades payable in that trade’s payable represents money owed in inventory.
